How does South Carolina tax capital gains?

South Carolina taxes capital gains as ordinary income at its graduated rates up to 6.4%, but it allows a 44% deduction on net long-term capital gains. That makes the effective top state rate on long-term gains roughly 3.6%, while short-term gains are taxed in full.

What is the South Carolina 44% capital gains deduction?

Taxpayers may deduct 44% of net long-term capital gains (assets held more than one year) before computing South Carolina tax. Only the remaining 56% of the gain is taxed at the state's ordinary income rates, sharply reducing the state burden on long-term investments.

What are the federal long-term capital gains rates?

Federal long-term gains are taxed at 0%, 15%, or 20% depending on your taxable income, far lower than ordinary rates. Short-term gains (assets held one year or less) are taxed as ordinary income at your regular federal bracket, up to 37%.

Does the net investment income tax apply?

A 3.8% federal net investment income tax can apply to gains for higher earners above $200,000 single or $250,000 joint. This calculator focuses on the core federal capital gains tax and South Carolina state tax and does not add the 3.8% surtax.

South Carolina Capital Gains Tax Calculator

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This calculator estimates the combined federal and South Carolina tax on your capital gains. It distinguishes short-term from long-term gains, applies the correct federal rate, and models South Carolina’s treatment of gains as income with its 44% long-term capital gains deduction.

How it works

Federal and state treat gains differently. Federally, short-term gains are taxed at your ordinary bracket while long-term gains use the preferential 0/15/20 percent rates based on income. South Carolina taxes all gains as ordinary income but lets you deduct 44% of net long-term gains first:

Federal short-term = gain x ordinary marginal rate
Federal long-term  = gain x (0% / 15% / 20% by income)
SC long-term       = (gain x 56%) x SC marginal rate
SC short-term      = gain x SC marginal rate
total              = federal + SC

Because of the 44% deduction, the effective top South Carolina rate on long-term gains is about 3.6% (6.4% x 56%), versus the full ordinary rate on short-term gains.

Example

A taxpayer with $20,000 of long-term gain and middling income pays the 15% federal long-term rate ($3,000). For the state, only 56% of the gain — $11,200 — is taxed at South Carolina’s ordinary rate of up to 6.4%, roughly $717. The combined tax is about $3,717, an effective rate near 18.6%.

Notes

This is a simplified estimate. It does not model the 3.8% net investment income tax, the interaction of gains stacking on top of ordinary income for the federal 0/15/20 thresholds, state subtractions, or AMT. The 44% deduction applies only to net long-term gains. Confirm with Schedule D and the SC1040 instructions at irs.gov and dor.sc.gov.